Deconstructing Arts Council statement

The Board of Directors have responded to the Clerk of Courts audit report and recent news reports on its finances. While I think the statement is well-meaning, it doesn’t really answer the questions raised by the auditor.

As the local arts organization of Escambia County, being an advocate of our cultural constituents and community, it is important for those groups and individuals, as well as the community in general, to understand that there has been no fraudulent or criminal activity by the Arts Council.

The auditor’s report has two findings that appear to point to fraud:

1. The report sent to the County for reimbursment included checks that had been written to the organizations, but in fact had not been distributed or paid. They had been presented to the County as being paid, thereby allowing the County to think the amounts were reimbursable.

2. Financial records for the Arts Council are kept on Quickbooks. The records for fiscal year 2009 were altered “after the fact” when the City requested support be provided of the Arts Council’s 2009 programmatic activities before remitting the 2010 planned appropriations of $40,000 in October 2009.

The recent events shedding light on late payments to the arts organizations through the Arts Council allocations process are simply a direct result of a shortfall in a fundraising goal, beginning in 2008-09 fiscal year.

While this statement is somewhat true, the board ignores the fact that County and City funds that were contractually intended only for those arts organizations were instead used to cover the shortfall in fundraising and pay operational expenses. According to the audit report, the funds can’t be used for other purposes without written permission from the County.

In addition to other notable cost-saving measures performed by the Arts Council, the organization recently entered into a lease partnership with Escambia County to occupy the old county courthouse at a cost of one dollar per year. …. The Arts Council moved into the courthouse in mid-October.

The Arts Council was leased the first floor of the old Courthouse to operate a visitor’s information center on the premises–that was the partnership element of the lease. The Escambia County Commission has directed County Administrator Bob McLaughlin to submit a Notice of Intent to Terminate Lease because the Arts Council failed to operate the visitor’s center and had subleased the space without obtaining approval of the BOCC.

The board of directors recently approved a reduced paid work schedule for the staff which entailed a two-week furlough being staggered between both employees. …This plan was one measure used to alleviate the financial hardship being experienced by the organization.

This conflicts with the auditor’s report: “During the fieldwork on the first day of the audit, the auditor was informed that the two Arts Council employees had been laid off due to insufficient funding to continue their salary and benefit payments. The Arts Council Executive Board had notified they were laid off as of Dec. 4, 2009. Both had been working as unpaid volunteers on a somewhat part-time basis since then.”

The Cinco Banderas Collection was created and endowed twenty-one years ago by the Kobacker family. The Arts Council has recently inventoried, repaired, restored, curated and hanged an exhibition of the entire collection for the first time in its history. An Arts Council committee maintains a collections management book as well as established policies and procedures to keep the collection well-maintained and serving the public as it was intended.

The October 2009 Profit & Loss report showed the Arts Council received $5,500 from the Kobacker Foundation and the money was used primarily for salaries. This receipt may or may not be in accordance with the Kobacker endowment.

Individual member artists and arts organizations may submit their credit card receipts to the Arts Council for processing. For a small fee of 5% which covers our expenses to banks and merchant services, we provide a check to those individuals and/or organizations for the credit card amounts.

The October 2009 financial reports show the Arts Council took in $8,710.63 and had $281.15 in Credit Card fees & materials fees and only paid out $2,517.71 to the artists. The balance sheet had no payable for credit card fees due artists. The proper accounting would be to not show the credit receipts as revenue to the Arts Council. Only the 5 percent processing fee should be shown as revenue since the other funds are actually due to the artists.

The Arts Council has established an independent committee with professional arts management representation to evaluate and score applications for funding. The application itself is based on one received from the Florida Arts Council. Once the applicants are scored, funds are distributed via an iteration formula obtained from the Florida Arts Council.

This is the crux of the Arts Council’s problems. Checks were written and presented as having been distributed but instead were sitting in a drawer in the Arts Council office. The applicants didn’t get the money that they were promised.